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May 2004: Forbes

The Slipper Solution

By David Whelan

JetBlue has figured out how to please critics of offshoring--and company cost-cutters. Let call-center employees work at home.

Pick up the phone to book a flight with JetBlue and you might reach Margo Canaan at her rented home in Salt Lake City. While the single mother helps fliers pick their seats, her five children, ages 4 to 16, occasionally sit in the same bedroom-office doing homework. They know to keep quiet so Mom can do her work. Her uniform: everyday clothes, plus a pair of fluffy white-and-blue slippers shaped like airplanes.

Canaan is one of 700 reservation phone agents for discount carrier JetBlue who don't work in some telephone warehouse in New Mexico or in an office in Bangalore, India. They instead work out of their homes in America, their company computers wired into JetBlue's reservation system.

These virtual call centers are one company's answer to the offshoring question: How do you cut costs while keeping jobs at home? An estimated 4 million people work in call centers in the U.S., while another 115,000 work in India--up from only 3,000 five years ago.

But home-based phone reps--there are about 100,000--disrupt the economics of offshoring. Operating a traditional call center in the U.S. costs about $31 per employee hour, including overhead and training. Home-based agents cost only $21 an hour on average. After wiring its agents' homes into its reservation system, JetBlue pays its agents starting wages of $8.25 an hour, plus benefits.

Sending those jobs to India would cut the costs even more, to maybe $10 an hour in wages and overhead. But JetBlue thinks the better service from home agents offsets that price advantage, notwithstanding the occasional barking dog in the background. Only one out of every 300,000 JetBlue passengers files a complaint for overbooking, baggage mishandling or other customer service problems, compared with three for big carriers like Continental and US Airways, according to federal data. Employees seem content. Agent turnover was only 4% last year, and the job is so popular that JetBlue rarely has to advertise to fill open positions.

David Neeleman, the discount carrier's chief, first used at-home workers when he ran Morris Air 12 years ago, well before offshoring became a political issue. His motivation was mainly to make agents happy, the theory being that happy workers sound better on the phone than morose ones. When JetBlue started in 1998, he put in the same setup.

Other companies, such as AIG and Travelers, are making use of home workers, too. Those financial giants contract with ARO, a Kansas City, Mo.-based call center that only uses home reps. ARO owner Michael Amigoni says rivals have to justify investments in real estate for call centers. Slippers are cheaper.